Nomura’s Richard Koo has issued a piece that reflects what Austrian economists have been saying for years now.
Ultimately the Fed will be presented with two choices:
1. Print infinite amounts of money to prevent a global default on the ponzi debt.
2. Allow a complete bankruptcy and collapse of the banking system to occur.
Since we know that a structured bankruptcy would destroy the wealth of the elite first, that is the last thing our glorious leaders will allow to occur.
Zero Hedge reports:
If it cannot, higher asset prices will be considered a bubble and will collapse at some point. The resulting situation could be much more severe than if quantitative easing had never been implemented to begin with.” Bingo.“In other words, if stock and commodity prices are in fact in a bubble and if those bubbles were to collapse, the balance sheets of the financial institutions and hedge funds making investments with the expectation of higher asset prices could suffer heavy damage, exacerbating the balance sheet recession in the broader economy. an increase in DCF values, either.” And there you have it: Bernanke’s all in gamble that QE2 would have been sufficient to restore the virtuous circle of the economy has failed with less than 2 months to go under the QE2 regime. As such, and with fiscal stimulus a dead end, the Fed has two choices: watch as the economy collapses in flames to a state far worse than its pre-QE1 outset, or do more of the same. That’s all there is. The rest is irrelevant. And since the Fed will choose the latter option, the market would be wise to start pricing in precisely the same reaction as what happened following the Jackson Hole speech…although to the nth degree.
Listen to Austrian economist Robert Murphy explicitly describe our current situation back in 2009